Page 5 - FSUOGM Week 34 2022

FSUOGM COMMENTARY FSUOGM

scenarios for Russian energy diversification to Western allies are looking to impose a global
China are highly contingent.” price cap on Russian oil, by threatening to deny
Russia has already reached a deal to sell an importers access to insurance for tankers unless
extra 10 bcm per year of gas to China via a new they agree to pay no more than a certain price.
Far East route, building on the 38 bcm per year “This would mean that Indian buyers would
it is already contracted to deliver at peak via the have to take more risks and rely on a less devel-
Power of Siberia pipeline. But sanctions have oped insurance market,” Shagina notes. “From
hindered the development of the offshore fields a political standpoint, China and Russia’s tight-
that would be needed to supply this gas. ening strategic partnership, and Moscow’s
Moscow and Beijing have also discussed expanding relationship with Pakistan, would
sending an additional 6 bcm per year of gas make India’s increasing energy reliance on Rus-
via Power of Siberia, but James Henderson, an sia difficult to sustain.”
expert at the Oxford Institute for Energy Studies With the EU committing to end its reliance
(OIES), notes that it would take until the second on Russian energy by 2027, and the bloc acceler-
half of this decade for the pipeline to increase ating its energy transition, it is clear that Russia’s
flow to the full 44 bcm per year. dominance as an energy supplier to the con-
Russia's largest project in the works is Power tinent will wane, even if some of Brussels’ tar-
of Siberia 2, which would pump 50 bcm per gets prove overly ambitious. Russia has already
year of gas to China via Mongolia, from fields helped realise EU’s goals through its own actions,
that currently serve the European market. But a having substantially reduced its gas exports to
gas deal for these supplies is not yet in place, and the bloc in recent years, forcing countries to push
Henderson doubts that deliveries could begin on with LNG import projects as fast as possible,
before 2027 at the earliest, with 2030 a more and irrevocably tarnishing Russia’s reputation
likely start date. as a reliable supplier. Just a year ago, Moscow
Russia also has aspirations to rapidly expand was touting its potential to become a major blue
its LNG export capacity prior to the invasion of hydrogen exporter to Europe, securing it a place
Ukraine, but with Western financiers, contrac- in the energy transition even as demand for
tors and suppliers largely barred from partic- hydrocarbons starts to recede over the coming
ipating in these projects, there are significant decades. That aspiration is now truly dead.
obstacles. “Furthermore, without access to foreign
If Russian gas exports to Europe drop to 50 technology and capital, it will be a tall order
bcm per year in the next couple of years, Russia for Russia to launch its own green transforma-
will be unable to replace volumes with additional tion,” Shagina writes. “Russia’s best chance to
Asian sales, Henderson notes. But Russia might achieve lies, again, with China. Given Beijing’s
be able to achieve a rebalancing of its export slow phase-out of gas, its decarbonisation plan
flows by the early 2030s, if it can deliver on its is compatible with Moscow’s own resistance to
project pipeline. an aggressively green agenda. China might also
“China’s oil demand is forecast to peak in be the only source available to Russia of clean
2027, and its commitment to net-zero emissions investments and green technology in exchange
by 2060 could well diminish the need for Russian for Russian hydrogen.
gas supply,” Shagina says. “This,” she continues, “leaves Russia at China’s
India has also been expanding Russian oil mercy. Moscow will become ever more reliant
purchases in recent months, taking advantage of on Beijing, intensifying the imbalance in their
their discounted prices as a result of sanctions. already strongly asymmetrical relationship. Bei-
Over the past few months Russia has emerged jing is likely to capitalise on Moscow’s isolation,
as India’s biggest oil supplier, expanding its much as it did after sanctions were imposed over
share of the country’s import mix from only its illegal annexation of Crimea in 2014, dictat-
1.3% to 25%. But Shagina notes that any further ing the conditions on energy deals and extract-
increase would run into technical and logistical ing maximum benefits while avoiding exposure
challenges. to sanctions.
“Rerouting Russian oil to India would have “Russia, for its part, has little leeway for hedg-
to be done via sea routes,” she writes. “This will ing given the breadth of the post-invasion sanc-
be harder after the EU and UK’s insurance bans tion coalitions, which include Asian countries
become effective, as European and British insur- such as Japan and South Korea,” Shagina con-
ance companies control over 90% of the insur- cludes. “Russia’s days as an energy superpower
ance market for oil tankers.” appear to be over.” ™

Week 34 24•August•2022 www. NEWSBASE .com P5